Brazilian economy shows biggest expansion in 14 years

Brazilia
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The Brazilian economy is ignoring the incidence of a global financial crisis and continues to grow at an unprecedented rate; in the first half of this year the Gross Domestic Product (GDP) had a growth of 8.9%, the biggest expansion in 14 years.

The Brazilian GDP growth exceeded expectations even though it had suffered a slowdown in the second quarter, when it grew only 1.2% compared to the first quarter. The performance of the economy during the first semester prompted the Central Bank to confirm its forecast for Brazil to close this year with a record expansion of 7.3%.

Although the government expected a slowdown in the second quarter after eliminating tax incentives to the sectors most affected by the crisis and the rise of the interest rates to deal with inflation, the growth of the GDP exceeded expectations.

Particularly pleased was the President of the Central Bank Henrique Meirelles, who had anticipated that the Brazilian economy "is heading in a path more conducive to long-term equilibrium."Despite the adjustment in the second quarter, the Central Bank estimated that the growth rate accumulated for the year would reach 7.3%" Meirelles said in a statement. Even more optimistic, Finance Minister Guido Mantega said: "With this variation (7.3%) we can expect the highest GDP growth in 24 years.”

According to a study released recently by the Ministry of Finance based on the current growth rate and the inflation and public spending under control, a cycle of sustainable growth is a reasonable expectation. The Ministry considers that, following a record growth this year, the Brazilian economy may achieve an average growth of 5.8% annually during the period 2011- 2014.

Compared with other major emerging economies, the Brazilian economy had an outstanding performance during the first semester of 2010. It grew 8.8% in the second quarter compared to the same period in 2009. During the same period, China's grew by 10.3%, while India achieved 8.8% and Russia 5.2%. Brazil's growth in the first half of 2010 (8.9%) was the highest since 1996, when the indicator began to be measured with the current variables.

With the presidential election coming soon in October 3, the strong growth in the economy could give an advantage to the ruling party candidate Dilma Rousseff, whose standing in the polls is rising propelled by the extraordinary popularity of her political mentor, outgoing President Luiz Inacio Lula da Silva.